Amazon increases India investments to $5 billion

Amazon Inc, the world’s largest online retailer, is planning to invest another $3 billion in India in the coming two years. This after the company exhausted its earlier investment pledge of $2 billion.

This investment highlights the ultra-aggressive rate at which Amazon is spending on discounts, advertising, and logistics to achieve its ambition of becoming the largest e-commerce company in India

Analysts and investors in India believed Amazon would take a few years to run through its earlier investment money of $2 billion, but the company shocked the market by burning through the cash in less than two years.

The additional amount will take Amazon’s total investment commitment in India to $5 billion.

Amazon is currently competing with market leader Flipkart and Snapdeal for the top spot in India’s e-commerce segment.

Amazon’s additional investment highlights the ultra-aggressive rate at which it is spending on discounts, advertising, and logistics among other things, to achieve its ambition of becoming the largest e-commerce company in India.

The announcement by Amazon Founder & CEO Jeff Bezos was made during Prime Minister Narendra Modi’s visit to the US. Modi, along with Sun Pharmaceutical founder Dilip Shanghvi, met Bezos during his visit and presented him with the US-India Business Council (USIBC) Global Leadership Award. USIBC is a lobbying group for businesses in the two countries.

Amazon’s additional investment plans to raise the stakes for Flipkart and Snapdeal who will need to keep raising fresh funds at a time when investors have soured on e-commerce.

The $5 billion investment will take Amazon India past the combined capital raised by both local rivals, Flipkart and Softbank-backed Snapdeal. While Flipkart has raised over $3.2 billion till date, Snapdeal has mobilised around $1.5 billion.

The India Story

Amazon launched in India only in June 2013, years after Flipkart (2007) and Snapdeal (2010). Yet it is now neck-and-neck with its two local rivals in the ongoing race at the top of India’s e-commerce market that is expected to grow to $60 billion by 2020 from $4.48 billion in 2014, according to UBS AG.

Amazon started India operations with cash on delivery, the preferred mode of payment, and also leveraged local Kirana stores for delivery of goods. It has also introduced a slew of initiatives for merchants like AmazonTatkal, which enables small businesses to get online in less than 60 minutes.

Amazon India has also built its own logistics network in India, which includes 21 fulfillment centers (FCs) owned by company and 50 owned by its sellers.